VietNam Business: production

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Friday, February 18, 2011

Finance Ministry to control prices

Customers buy bread at Big C supermarket in Ha Noi. — VNA/VNS Photo Tran viet

HA NOI — The Ministry of Finance has said it will step in to control prices on the domestic market following predictions that they are expected to rise by the end of the year.

Nguyen Tien Thoa, director of the ministry's Pricing Management Department, said the recovery of the world economy and increasing demand for materials for production and business would push prices up on the world market by the end of this year.

He said the department should be able to keep the expected increases down to a modest level. However, the high demand for goods and services before Tet, plus any diseases in livestock would keep the pressure on prices.

Difficulty in raising capital for production and electricity costs would also add to the pressure.

Thoa said the State would check on the amount of goods in stock and register sales prices of 17 essential goods to avoid speculation.

By the end of December, prices of electricity, coal, paper, cement, tap water, transport would be stabilised.

Last week, Prime Minister Nguyen Tan Dung called on ministries, agencies and municipal and provincial authorities to implement strategies to stabilise the market and boost production.

Directive No1875/CT-TTg has been designed to ensure Viet Nam's growth rate reaches 6.5 per cent and the consumer price index (CPI) does not rise above 8 per cent. — VNS

Thursday, February 10, 2011

First wind energy turbine factory opens

Vietnam ’s first wind power turbine production factory was
inaugurated at the Nomura industrial zone in the northern port city of
Hai Phong on October 15.

The 61 million USD project, invested by the US-based GE group, rolled
out over 200 turbines for export in the past five months of test run.

In the first stage the factory will produce 1.5 MW turbines for
export and is scheduled to mass produce some 10,000 parts and assorted
turbines annually. Its products will be forwarded to GE production
facilities worldwide to be assembled into end products.

The factory now provides stable jobs for over 250 local workers and
contributes to domestic production and daily life as well as for export.

John Krenicki, Vice President of the GE Group and
President cum General Manager of GE Energy operations in Vietnam ,
hailed Vietnam as an ideal destination for investment and expansion
of production capacity thanks to its skilled workforce and the bright
prospects of the regional energy industry.

The
US giant unveiled a plan to upgrade and expand the factory into a
complex specialising in power equipment for clean energy production to
meet national and global demand./.

Saturday, February 5, 2011

State to develop fertiliser plan

The control of fertiliser production and distribution systems, to be
approved this month, is expected to benefit both farmers and businesses.

Speaking at a conference on Oct. 12 outlining fertiliser production
development for the next 10 years, the Deputy Minister of Industry and
Trade (MIT), Nguyen Hai Nam , said fertiliser is a strategic product
that helps ensure national food security.

Although
the Government has cooperated closely with the Vietnam Fertiliser
Association in planning fertiliser production and quality, farmers are
still faced with shortages and "price fever" when demand soars before
planting, said Phung Ha, head of MIT's Department of Chemicals.

Secretary of the association Nguyen Hac Thuy said there has been no
clear development strategy for the fertiliser industry and that demand
is unpredictable.

According to the association,
farmers lose 1.2 trillion VND (60 million USD) each year due to the
low-quality and fake fertiliser products.

This
year, the nation's demand for fertiliser is forecast to reach 9.1
million tonnes, but domestic production can satisfy only 60 percent of
this.

A report from An Giang University's Economics
Faculty claims farmers have to buy fertilisers at prices 30-40 percent
higher than those offered by producers. They often have to buy
low-quality products from small firms because State authorities can only
supervise large fertiliser companies.

Ha said one
of the reasons fertiliser prices are often unstable was that
distribution systems develop spontaneously. Products come to farmers
through many middlemen.

Ha said when planning is
approved, fertiliser distribution systems will develop based on the
establishment of agricultural economic areas, demand in each area, the
characteristics of local economic activities and farmers' purchasing
practices.

Under the plan, from now to 2015,
fertiliser distribution centres will be set up in Lao Cai, Phu Tho, Bac
Giang, Hai Duong, Ninh Binh, Nghe An, Da Nang, Binh Dinh, Dac Lac, Lam
Dong, Long An, An Giang, Can Tho and Kien Giang.

Ha
said to make planning more efficient, State agencies should change
their ways of management. He added that producers must be granted
certificates setting out conditions for business required by the
Ministry of Industry and Trade. Otherwise they should not be allowed to
trade.

He said this would help weed out small-scale companies using old technology and those producing low-quality fertiliser./.

Toyota may end Corolla exports from Japan due to yen

Photo: AFP

TOKYO - Toyota Motor Corp is considering halting exports from Japan of the Corolla sedan from around 2013 and shifting that output overseas due to the yen's strength, the Tokyo Shimbun daily reported on Thursday.

The yen's rise to a 15-year high against the dollar is threatening the competitiveness of Japanese exports and prompting manufacturers to consider shifting more output outside Japan.

The Corolla is one of Toyota's best-selling models and is built in 15 countries. In 2009, Toyota made about 235,000 Corollas in Japan -- nearly 60 percent of those exported -- and 815,000 abroad. Toyota is due to start producing the Corolla at its new Mississippi plant from autumn 2011 after the closure of a California factory formerly owned with General Motors Co.

Toyota spokesman Paul Nolasco said the company was constantly looking to optimize its global production structure, but that no decision had been made regarding the shift of export-bound Corollas outside Japan.

"At the current exchange rate, the more Corollas Toyota ships overseas, the more money it loses," Advanced Research analyst Koji Endo said. He added that to make money on the compact Corolla model, Toyota would have to shift production overseas or drastically reduce costs, or both.

Tokyo Shimbun reported that the world's largest car maker was also considering shifting production of all Corolla cars sold in Japan to one of its subsidiaries. Toyota currently builds the model at its own Takaoka factory, and at two units, Kanto Auto Works and Central Motor Co.

In a similar move aimed at making its domestic operations more competitive, Nissan Motor Co said this month it may turn one of its Japanese factories into a new subsidiary, allowing it to broach wage negotiations with labor unions and seek lower prices from suppliers.

Most automakers have vowed not to close any assembly plants in Japan but executives have warned that suppliers may be forced to shift production abroad in a threat to jobs in Japan's fragile economy.

"Maybe they don't realize just how much damage poses on companies," Mitsubishi Motors Corp President Osamu Masuko told reporters on Thursday.

"I guess we have to speed up our efforts to deal with the strong yen. Shifting production overseas takes time, but for example we can vastly increase purchases of auto components from abroad. That can be done in the near term."

Toyota is aiming to make its domestic factory lines more flexible and introduce other changes to be able to break even at a dollar rate of 90 yen and capacity utilization of 70 percent, equivalent to daily production of 12,000 units.

The dollar was trading near 81 yen on Thursday.

A production shift away from Japan would mean even more capacity in Japan would go unused unless Toyota is able to fill the hole with other cars.

Overall production of vehicles in Japan plunged 31.5 percent in 2009 to 7.93 million units, below 10 million for the first time in eight years. Exports fell by a much sharper 46 percent as automakers sought to limit foreign exchange losses.

Shares of Toyota closed up 3 percent at 2,930 yen, while the benchmark Nikkei average gained 1.9 percent.

Friday, February 4, 2011

Measures urged to stabilise prices

HA NOI — Prime Minister Nguyen Tan Dung has called for greater implementation of measures to stabilise prices in the final months of the year.

Directive No1875/CT-TTg, released on Monday, called on ministries, agencies and municipal and provincial authorities to implement strategies to stabilise the market and boost production, in accordance with Decree No18/NQ-CP, dated April 2010. The move is designed to ensure the country's growth rate reaches 6.5 per cent, while the consumer price index does not rise above 8 per cent.

According to the leader, the economy, which typically suffers during the final months of the year, will also have to weather capital shortages, rises in the price of essential goods, power shortages and potential animal epidemics.

The directive regulates that ministries of Industry and Trade, Agriculture and Rural Development, Health, and Construction should complete and release production-development plans, as well as strategies for distributing essential goods such as petrol and gas, fertiliser, building steel, cement, foodstuffs and medicines in the fourth quarter.

The Ministry of Industry and Trade should review production capacity and supply to ensure there are sufficient quantities of goods for production and consumption from now to the first quarter of 2011.

Finance Ministry agencies are required to enhance supervision of commodity prices – particularly medicines, milk products, building materials and gas, while stabilising the price of electricity and coal sold to the cement industry and fertilisers and paper producers.

The State Bank of Viet Nam should promulgate policies that allow commercial banks to quickly withdraw money from circulation to reduce price hikes. Meanwhile, food suppliers should ensure there is enough food, particularly in cities, industrial zones, populous areas and those vulnerable to natural disasters, the directive said. — VNS

State to develop fertiliser plan

Fertiliser is packaged at a plant in HCM City's Cu Chi District which supplies fertilisers for agricultural production in southern provinces. Fertilisers are seen by the Government as a strategic product. — VNA/VNS Photo Hoang Hai

HA NOI — The control of fertiliser production and distribution systems, to be approved this month, is expected to benefit both farmers and businesses.

Speaking at a conference on Tuesday outlining fertiliser production development for the next 10 years, the Deputy Minister of Industry and Trade (MIT), Nguyen Hai Nam, said fertiliser was a strategic product that helped ensure national food security.

Although the Government had co-operated closely with the Viet Nam Fertiliser Association in planning fertiliser production and quality, farmers were still faced with shortages and "price fever" when demand soared before planting, said Phung Ha, head of MIT's Department of Chemicals.

Secretary of the association Nguyen Hac Thuy said there had been no clear development strategy for the fertiliser industry and that demand was unpredictable.

According to the association, farmers lose VND1.2 trillion (US$60 million) each year due to the low-quality and fake fertiliser products.

This year, the nation's demand for fertiliser is forecast to reach 9.1 million tonnes, but domestic production can satisfy only 60 per cent of this.

A report from An Giang University's Economics Faculty claims farmers have to buy fertilisers at prices 30-40 per cent higher than those offered by producers. They often have to buy low-quality products from small firms because State authorities can only supervise large fertiliser companies.

Ha said one of the reasons fertiliser prices were often unstable was that distribution systems developed spontaneously. Products came to farmers through many middlemen.

Ha said when planning was approved, fertiliser distribution systems would develop based on the establishment of agricultural economic areas, demand in each area, the characteristics of local economic activities and farmers' purchasing practices.

Under the plan, from now to 2015, fertiliser distribution centres will be set up in Lao Cai, Phu Tho, Bac Giang, Hai Duong, Ninh Binh, Nghe An, Da Nang, Binh Dinh, Dac Lac, Lam Dong, Long An, An Giang, Can Tho and Kien Giang.

Phan Dinh Duc, general director of PetroVietnam Fertiliser and Chemicals Joint Stock Company, suggested that small-scale producers who did not have the financial capacity to build their own distribution systems could join those of larger companies.

Ha said to make planning more efficient, State agencies should change their ways of management. He added that producers must be granted certificates setting out conditions for business required by the Ministry of Industry and Trade. Otherwise they should not be allowed to trade.

He said this would help weed out small-scale companies using old technology and those producing low-quality fertiliser.

Head of the Ministry of Agriculture and Rural Development's Planting Department Nguyen Tri Ngoc said management of fertiliser distribution systems should be placed in the hands of one authority to prevent overlapping among ministries and agencies.

Tri added that production standards should be completed to enable management of the industry to be tightened. — VNS

Tuesday, February 1, 2011

Top mining company to de-list shares

Sai Gon Quy Nhon Mining Co (SQC) will seek shareholder approval to
suspend its listing on the Hanoi Stock Exchange due to unfavourable
business conditions.

The company's general director,
Tran Trieu Thanh, told a press conference on Oct. 11 that production
at the plant has been suspended due to the imposition of high export
taxes.

The company operates the Sai Gon Quy Nhon
titanium slag plant, the first plant in Vietnam to produce titanium
slag at a purity of 93 percent.

The export tax
levied on titanium slag is currently 15 percent – down from an earlier
18 percent but still too high for the company's exports to remain
competitive.

To cope with the high tarriff and
attempt to cut its losses, Sai Gon Quy Nhon Mining Co began reducing
capacity at the plant in July this year, Thanh said.

Suspending the loss-making slag production operations entirely actually
would improve the company's bottom line, Thanh said, hinting that
production could resume in the first quarter of 2011, when tarriff
changes could be possible.

Meanwhile, the suspended
operations are having a negative impact on share value, prompting the
management's decision to de-list, pending shareholder approval.

The company's leading shareholder, Dang Thanh Tam, said the blue-chip
shares had a large impact on movements of the HNX-Index.

In response to the concerns of small shareholders, Tam said, the
company's management board plans to buy back shares from any investors
that no longer wish to invest in the company.

Changes in tarriff policies would be decisive as to how long the listing would be suspended, Thanh said.

"I believe the State will soon realise our difficulties and make proper changes to support our production," he added./.

Wednesday, January 12, 2011

Industrial sector urged to surpass year's target

HCM CITY — The industrial production sector should strengthen production, investment and exports in the remaining months of the year to surpass the annual target set by the Government, says Vu Huy Hoang, Minister of Industry and Trade.

Speaking at an online – meeting to review the sector's performance in the first nine months and set tasks for the last three, Hoang said industrial production for the whole year is expected to increase by 14 per cent, higher than the Government's 12 per cent target.

Industrial production in the first nine months of the year surged 13.8 per cent year-on-year, reaching roughly VND574.5 trillion (US$30.24 billion), he said.

In September alone, industrial production was valued at VND70.7 trillion ($3.7 billion), up 15.1 per cent over the same period last year.

The fourth quarter is the most important stage since high growth in this stage will create the proper momentum for the sector to enter a new year, he said.

Although the sector has achieved strong growth in the past several months, industrial production has not created export products of high added value, mostly focusing on outsourcing products.

The sector's development efficiency therefore remains low while supporting industries have not developed, delegates at the meeting said.

In addition, power shortages and high interest rates have caused and will continue to cause difficulties for businesses, they added.

Hoang asked the Electricity of Viet Nam Group to co-operate with the Viet Nam National Petroleum Group (PVN) and Viet Nam Coal and Minerals Industries Corporation to step up efforts to meet power consumption demand.

PVN, for instance, should shorten the time taken for gas pipeline maintenance at its power plants in Ca Mau Province, he said.

"The power sector must ensure sufficient power supply for industrial production in any situation," Hoang stressed.

Regarding high bank loan interest rates and exchange rates, Hoang said the recent appreciation of the US dollar against the dong has benefited exporters, but caused difficulties for import companies.

He ordered relevant agencies to work with the State Bank of Viet Nam (SBV) to ensure sufficient supply of dollars for enterprises who need to import materials for their production.

He also suggested that the SBV reduces interest rates to support enterprises in developing their production and trading activities.

To ensure the sector's sustainable development, it needs to improve labour productivity, promote development of auxiliary industries and improve investment efficiency, said Le Van Duoc, director of the Planning Department under the Ministry of Industry and Trade.

Developing auxiliary industries would help businesses become more active in production and gradually reduce reliance on imports, he said.

Delegates at the meeting petitioned the Ministry of Industry and Trade to enhance the programme that brings Vietnamese goods to rural areas and set up distribution agents in these areas so that domestic products can gain a strong foothold in the rural market. — VNS

Wednesday, January 5, 2011

Global steel production may plateau in 5 years

Photo: Reuters

TOKYO - Worldwide steel production may plateau over the next five years as a result of environmental pressures and smaller demand increases, one of the world’s top steelmakers said in a report Monday.

JFE Steel of Japan told the Financial Times that annual output would rise as high as 1.6 billion tons by the middle of the decade and then stay roughly constant for 5-10 years.

The flattening of production would result from shortages of key resources as well as the likelihood of only relatively small rises in demand, JFE chief executive Eiji Hayashida told the newspaper.

"In this environment, the pressures will be on steel companies to move to more advanced and valuable forms of steel to suit the needs of new industries, rather than add to production volumes," Hayashida said.

The biggest hindrance to future output rises, according to the JFE chief, would be growing constraints on water and energy supplies amid deepening worries about climate change.

Many steelmakers were also concerned about their ability to pass on to customers the large recent increases in iron ore prices.

This year JFE expects to make 30 million tons of steel, with the figure likely to rise to 33 million tons in 2011 following plant expansions, the Financial Times said.

The World Steel Association trade group opened its annual conference in Tokyo on Monday.

Friday, December 24, 2010

Industrial production surges past annual target

HA NOI — Industrial production in the first nine months of the year surged 13.8 per cent year-on-year, higher than the Government's 12 per cent annual target, to reach roughly VND574.5 trillion (US$30.24 billion), according to the General Statistics Office.

In September alone, industrial production valued VND70.7 trillion ($3.7 billion), up 15.1 per cent over the same period last year.

With a growth rate of 17.4 per cent in the January-September period, foreign invested enterprises topped the list, creating value of VND241.8 trillion ($12.7 billion). Private businesses followed with a surge of 12.7 per cent to VND201.1 trillion ($10.59 billion). State-owned firms faired the worst, churning out an output of only VND131.5 trillion ($6.9 billion).

The GSO reported that the processing industry accounted for nearly 90 per cent of the country's total industrial production value in the first nine months, noting that the industry's 14.7 per cent growth rate contributed significantly to the country's growth rate of 13.8 per cent in January-September.

The significant growth of the processing industry was, according to the GSO, due to the world's economy recovery, which had helped industrial producers, especially foreign invested firms, to enlarge their production in the wake of rising consumer demand.

Sport shoe production saw a robust surge of 25.2 per cent year-on-year, churning out 146.3 million pairs. Glass production also rose 22.8 per cent to 69.2 million sq.m. Cement, fridges, vans and motorbikes also reported significant increases between 16.4 per cent and 21.1 per cent.

However, the mining industry in the first nine months of the year reported a modest 3.8-per-cent growth over the same period last year, with coal only rising 1.4 per cent to 32.4 million tonnes. Crude oil exploitation even reported a 13.8-per-cent decrease to only 11.1 million tonnes in the first nine months.

Deputy director of the Ministry of Industry and Trade's Planning Department Nguyen Thanh Hoa said the industrial production's growth had surged and remained stable at more than 13 per cent since April.

Besides the global recovery, Hoa also attributed the positive results to the effective implementation of Government policies including the encouragement to use Vietnamese products and the measures to limit the trade deficit.

With the increasing rate, Hoa forecast that the country's industrial production would rise roughly 14 per cent this year. — VNS

Wednesday, December 22, 2010

Spanish firms see Vietnam as good production base

Judith Padrós (L) of the Barcelona Chamber of Commerce talks to Vietnamese guests at a networking event held here on Monday evening for Spanish delegates and their local counterparts - Photo: Mong Binh

HCMC – Many Spanish companies are looking for the opportunity to invest in Vietnam as they consider this market as an attractive base for both production and consumption, said the Spanish economic and commercial counselor in Vietnam.

Alberto Cerdán told the Daily that executives of some 30 Spanish companies operating in various business fields would participate in a major investment forum planned here in November this year.

Cerdán released the news as Spain’s Barcelona Chamber of Commerce in association with the Segovia and Gijon chambers of commerce is organizing a mission to Vietnam, Laos and Cambodia to explore new business opportunities and expand their presence in those markets.

The visiting delegation groups Spanish firms in agricultural equipment, project and consultancy services, perfume and aroma, cosmetics, timber products and services, hospital equipment, and waste water treatment among others.

“We are here, not only to sell our products and services but also to look to partnerships with local partners,” Judith Padrós at the Barcelona Chamber of Commerce, told the Daily at a networking event held in HCMC on Monday.

Cerdán elaborated that some of the Spanish businesses coming to Vietnam in November had already built factories in China, and they wanted to invest in production facilities to take full advantage of lower labor cost in this country and to expand their operations in Asia.

He explained competition in Europe was turning tougher so Spanish companies would gain an advantage in that market if they were able to make products with competitive prices, and Vietnam had emerged as a haven for them.

He confirmed Spanish enterprises were keen to turn out garments and footwear in Vietnam for export to Europe and the United States as well as for consumption in this market.

“They start to think about Vietnam as a market for both production and consumption. For that they need their footing in the region,” he said.

In addition to garment, footwear and fish products, Vietnam will be able to attract Spanish investors in areas of logistics, building materials, food additives, farming and pharmaceutical, according to the Spanish counselor.

Spain is also involved in the fifth subway line to be developed in HCMC. Cerdán said Idom Ingenieria Consultoria S.A. and its local partners had almost completed the feasibility study for the subway development funded by Spain’s ODA loans.

The fifth subway line will stretch 15 kilometers from Can Giuoc Coach Station in District 8 to the Saigon Bridge and the 6-kilometer-long sixth line will connect Ba Queo in Tan Binh District and Phu Lam in District 6. An initial plan envisaged around US$900 million for developing the first route and US$320 million for the latter.

In December last year, high-ranking officials of Spain and Vietnam signed a memorandum of understanding under which the European country will provide up to 500 million euros (some US$674 million) for subway development in HCMC.

Spanish firms see Vietnam as good production base

Alberto Cerdán told the Daily that executives of some 30 Spanish companies operating in various business fields would participate in a major investment forum planned here in November this year.

He confirmed Spanish enterprises were keen to turn out garments and footwear in Vietnam for export to Europe and the United States as well as for consumption in this market.

“They start to think about Vietnam as a market for both production and consumption. For that they need their footing in the region,” he said.

Tuesday, November 16, 2010

Latest technology, market info top priority for firms

by Mi Bong

HCM CITY — The ability to access market information and advanced technology were the two major factors affecting the business community in the second quarter of the year, according to Viet Nam Business Insight Survey.

At a seminar held yesterday in HCM City by the Viet Nam Chamber of Commerce and Industry, Pham Thi Thu Hang, head of the Business Development Institute, said the survey had received 374 responses from domestic enterprises.

Government investment in information and technology had helped further the use of advanced technology, they said.

Domestic and foreign market demand ranked second and third, respectively.

Some other influences included production costs, loan access, skilled human resources, infrastructure conditions such as water, electricity and wastewater treatment systems, transport infrastructure, land issues and site clearance.

The survey discovered that 65 per cent of businesses must borrow a short-term loan with an annual interest rate of 12-13 per cent and upwards.

Most of them said the interest rate was too high and would affect their investment plans.

The businesses said the interest rate should be adjusted to below 12 per cent to create favourable conditions to their production and business.

They expected there would be positive changes related to macroeconomic policies, loan access conditions and infrastructure improvement.

Vo Tan Thanh, director of the VCCI's HCM City branch, said the Viet Nam Business Insight Survey aimed to investigate and collect concerns and feedback from the business community through online fora.

It targets documenting the state of economy, industry and business environment in a timely and accurate manner.

The VBiS will also provide the Government as well as firms and executives with a precise and comprehensive insight into Vietnamese enterprise development and feedback on policy.

It was launched by the VCCI, the Asia Competitiveness Institute and the General Statistics Office under the sponsorship of the Asia Foundation.

At the seminar, Vu Van De, head of HCM City Statistics Department's Statistics-Industry Sub-Department, said industrial production growth in the first eight months of this year had increased 8.8 per cent over the same period last year.

The water and electricity distribution as well as production industry had the highest growth rate, 15.4 per cent, in the period.

The manufacturing and processing industry accounts for the highest, 60.1 per cent of total industrial production value, an increase of 11.6 per cent.

Challenges

Although industrial production has overcome the financial crisis period and seen a growth, it has faced challenges.

By early August, because of a drop in exports, the warehousing of manufacturing and processing products was fairly high, with an increase of 137.5 per cent over the same period last year, while consumption reached 112 per cent.

Power shortages in the first and second quarters affected the economy greatly.

Technical and trade barriers have made exports slow and unstable, causing a back-up of stored goods in the manufacturing and processing industry, according to the report. — VNS

Friday, November 5, 2010

Apparel makers expand production

Domestic garment makers are expanding production to meet rising domestic and global demands. A production line at Minh Dao Garment Company in Ninh Binh Province. — VNA/VNS Photo Tran Viet

HA NOI — Ten companies under the Viet Nam National Textile and Garment Group (Vinatex) have made production expansion investments to meet increasing orders from foreign partners and rising domestic demand.

The Dap Cau Garment Joint Stock Co invested nearly VND100 billion (US$5.13 million) in a new factory in the northern province of Bac Ninh. It was put into operation in February and has the capacity to produce 9 million products annually.

Nguyen Dang Luan, chairman of Dap Cau Co said the new facility would help the firm meet the rising number of export contracts.

"When the factory was prepared to begin operating the first 16 production lines the firm had already signed export deals for the whole year with three partners, generating 1,800 jobs," Luan said.

The TNG Trade and Investment Co in the northern province of Thai Nguyen recently invested around VND210 billion to construct its fourth facility. The new TNG Phu Binh garment factory has a design capacity for 10 million products annually and the potential for 4,000 jobs.

The company expects the mill to be operational by the first quarter next year with 64 production lines which will bring the company's total number of lines to 172, making it one of the largest textile and garment makers in the country.

The chairman and director general of TNG Co, Nguyen Van Thoi, said textile and garment orders had shifted from China to Viet Nam. Trends have also shown orders shifting from the South to the North of the country due to more advantages in terms of labour forces.

The firm made the decision to build the new factory because its customers were well-known brands from the US and Canada such as Columbia Sportswear, The Children's Place and Capital. These partners had committed to signing long-term contracts and asked TNG to increase production, Thoi said.

"TNG plans to intensively bolster its investment so that it can produce various kinds of products from raw materials to final products in order to meet higher overseas contract requirements by 2015," he said.

Nha Be Garment Joint Stock Co has 33 affiliates and subsidiaries with $240 million in annual export turnover. Last year, despite being faced with many difficulties caused by the global economic crisis, Nha Be still approved a plan to inject trillions of dong in multiple projects.

Of the total, Nha Be invested more than VND200 billion to expand two projects – An Nhon Garment Joint Stock Co, which produces women's suits and sportswear, and Tam Quan Garment Joint Stock Co, which produces trousers, jackets, and T-shirts. Both expanded projects are expected to launch late this month.

Duong Thi Ngoc Dung, chairwoman of Nha Be, said the expansion would help her enterprise increase its export revenue by 20-25 per cent this year over last year and reach stronger export growth next year.

Nha Be will also begin construction of the Nha Be – Tam Quan clean industrial zone and the Phu Cat complex on production, trade and services later this month.

To ensure sustainable development of the textile and garment industry, large firms should closely co-ordinate with one another to make bold investments in weaving, dyeing and raw materials to shift from implementing sub-contracts to direct contracts, said experts.

In the first eight months of this year, the sector reached a total export value of $6.9 billion, a year-on-year increase of 17.8 per cent, making it the country's biggest foreign currency earner.

In addition, producers also managed to enhance sales in the domestic market. Le Quoc An, chairman of the Viet Nam Textile and Apparel Association said member companies had reached a 15-18 per cent growth domestically. — VNS

Saturday, September 18, 2010

Economic Profile And Inventories

An outlet of Fuvimart in HCM City. The ratio of inventories to production for toothpaste in the first half of this year was 207%

Consumption patterns are leaning toward imports while demand for local products becomes lackluster. If this problem persists, stagnation may arise.

After several years of industrialization, Vietnam has effectively grown into a global subcontracting base whose real earnings often trail far behind the export turnover reported. Rosy export figures are therefore misleading and unfortunately mask the downside of mushrooming industrial parks. What has the demise of vast areas of farm land really brought about, then?

While the virtues of Vietnam’s subcontracting industry must be acknowledged, the fact remains that the sector is increasingly inefficacious, with the ratio of intermediate costs to production value jumping by nearly 10 percentage points over the past decade and the efficacy of capital use dwindling drastically. According to estimates based on statistics on investment and gross domestic product (GDP), adjusted for price parity, the incremental capital output ratio hovered around 8.36 in 2003-2008 and reached 8.59, 11.44 and 14.22 in 2007, 2008 and 2009 respectively. Such dismal inefficiency is all the more worrisome given that industry and construction absorb staggering amounts of investment every year.

In some cases, inventories even outpaced production in the first half of 2010. The ratios of inventories to production for powder coffee, nutrition powder, synthetic fiber, fabric made of synthetic fiber, vaccine, shampoo, soap, toothpaste and dining tables were 107%, 349%, 143%, 150%, 474%, 171%, 202%, 207% and 166% respectively.
This problem is ascribable to piling inventories from last year and shrinking consumption in the first half of this year. Besides, there are many products whose inventories equaled at least production in the first six months. This trend indicates the difficulty in stoking demand for locally processed products. Worse still, the surge in retail sales (26.7%, as reported by the General Statistics Office) and in imports (14.5%, adjusted for inflation) over the same period shows that consumption patterns are shifting in favor of foreign goods. If this problem persists, local production will plunge into trouble soon.

Notably, this trend may lead to a misleading analysis of GDP, which, under the final use approach, comprises inventories, final household and government consumption, and fixed asset accumulation. In other words, soaring inventories will probably push up GDP.

It is worth stressing that savings are shrinking (from 36.29% of GDP in 2006 to 29.23% in 2009) while investment as a share of GDP is on the rise. In other words, Vietnam will be increasingly reliant on external capital sources to make up for the shortfall in internal financial capabilities.

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